In December 2025, the National Association of Insurance Commissioners approved new regulatory requirements for combination "coinsurance – yearly renewable term" reinsurance agreements ("Co-YRT Agreements"). While these developments have been broadly reported, this article addresses their practical implications for insurers.

These requirements mandate Co-YRT Agreements featuring interdependencies between their coinsurance and yearly renewable term "blocks" comply with Statements of Statutory Accounting Principles Appendix A-791 in the aggregate, rather than separately for each block as had been prior practice. Such "interdependencies" may include experience refunds combining the coinsured and YRT blocks and prohibitions on recapturing one block but not the other. Evaluating the two blocks together is crucial because SSAP 61 paragraph 19 exempts YRT reinsurance from four paragraphs of Appendix A-791 applicable to coinsurance: 2.a., 2.e., 2.f., or 2.g. Paragraph 2.a. requires reinsurers pay renewal allowances adequate to cover ceding companies' renewal expenses, and paragraph 2.e. caps reinsurance premiums at the insurance premiums paid by policyholders. YRT reinsurance, however, rarely provides for allowances, typically sets reinsurance premiums based on risk and may allow reinsurers to increase reinsurance premiums.

Paragraphs 2.f. and 2.g. require reinsurance transfer all "significant risks" to the reinsurer, with term life and health insurance (excluding long-term care and long-term disability) having to transfer mortality or morbidity, respectively, and lapse risk, while reinsurance of other products must also transfer investment risk and typically legally segregate underlying assets. YRT reinsurance, in contrast, generally only transfers biometric risk – mortality on life insurance, morbidity on health insurance and longevity on annuities.

The concept of aggregate compliance requires that the YRT portion must comply with these paragraphs for the Co-YRT Agreement to qualify for reinsurance accounting treatment. Deficiencies in renewal allowances and excesses of reinsurance premiums over insurance premiums could force insurers to establish appropriate reserves which, particularly on longer-tail business, could reduce a Co-YRT Agreement's surplus relief, while a failure to transfer all significant risks would mandate restructuring which could then change the transaction's economic profile.

These new rules apply to new and newly amended Co-YRT Agreements immediately, and inforce transactions must become compliant by December 31, 2026 or lose reinsurance accounting treatment. Thus far, some regulators appear willing to provide temporary relief for inforce transactions so this deadline could be less problematic for insurers than originally feared.

Insurers' challenges are not, however, limited to bringing inforce Co-YRT Agreements into compliance by December 31, 2026. Some Co-YRT Agreements will include triggers arising at contractually specified future dates to encourage insurers to unwind or refinance such transactions. Moreover, insurers will also have reserve financing needs to mitigate reserve strain on new business. A regulator that allows an insurer temporary relief on an inforce Co-YRT Agreement for the 2026 deadline may be unwilling to extend such regulatory relief to future, economically motivated refinancings of the same Co-YRT Agreement or to a Co-YRT Agreement to finance reserve strain on new business. Consequently, insurers' greatest challenge may not be the 2026 deadline but the ongoing need to finance, and refinance, reserve strain on legacy and new business.

The challenges of restructuring or refinancing inforce transactions and executing new reserve financings will depend on several factors, including product type, age of business and regulatory engagement. Historically, captive reserve financings were an alternative to Co-YRT Agreements but are less common in the era of Principles Based Reserving. Moreover, term and universal life insurance policies issued before January 1, 2015 are generally not eligible for grandfathering under the Term and Universal Life Insurance Reserve Financing Model Regulation unless they were ceded to a captive structure on December 31, 2014. If not grandfathered, refinancing such policies into a captive structure would require "Primary Security" hard asset funding, as would captive transactions for term or universal life insurance policies written after December 31, 2014, and captive financings will likely offer limited benefits for PBR products.

Where both blocks in a Co-YRT Agreement are term life, restructuring and refinancing may be easier due to Appendix A-791 limiting significant risks to mortality and lapse. Universal life blocks may prove more challenging, given their significant risk profile under Appendix A-791 and potentially higher Primary Security requirements. Annuity riders may represent a middle ground between term and universal life, depending on rider type, rider features and whether the underlying annuity contracts are also ceded under the same Co-YRT Agreement which could implicate additional significant risks under Appendix A-791.

To manage these new requirements, insurers should establish dialogue with regulators and reinsurers, analyze the structure of, and products ceded or to be ceded under, reserve financing arrangements, and develop a comprehensive gameplan to address inforce transactions, inforce transactions that are likely candidates for refinancing and potential future transactions.